The FCA uses a range of tools to carry out its responsibilities and meet its objectives.
The FCA is a principles-based regulator and it expects regulated firms not only to follow its prescribed Rules, but also to follow the ‘spirit' of what the FCA is seeking to achieve. For example, it expects regulated firms to treat their customers fairly in all that they do.
Underpinning the FCA's principles-based approach, are the FCA's Principles for Businesses here (referred to as ‘PRIN') which set out the fundamental obligations for firms under the regulatory regime. The 11 over-arching Principles have the force of Rules and firms are required to demonstrate compliance with them.
Conduct risk is a key theme of the FCA's regulatory regime, where it will use intelligence gathered from its supervisory work to identify potential or actual consumer harm caused by the actions of firms or markets and take action to address that conduct (see below). A key Principle for firms related to conduct risk is:
Principle 3 - “a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems”.
Broadly, this obligation extends to a firm's:
- Robust governance arrangements
- Skills, knowledge and expertise of staff
- Outsourcing responsibilities
- Any conflicts of interest